WASHINGTON, DC—June 17, 2019— The Centers for Medicare & Medicaid Services (CMS) today announced that it will settle inpatient rehabilitation facility (IRF) appeals at rates very favorable to IRFs.  The settlement was negotiated by Powers attorneys Peter Thomas and Ron Connelly on behalf of the Fund for Access to Inpatient Rehabilitation (FAIR), the American Medical Rehabilitation Providers Association (AMRPA), and the Federation of American Hospitals (FAH).  FAIR’s participation in litigation challenging the backlog of Medicare Administrative Law Judge (ALJ) appeals was an important factor bringing CMS to the negotiating table. The IRF settlement offers the highest percentage recovery of any CMS global settlement to date and will finally bring relief to IRFs while also reducing the ALJ backlog.  The settlement includes several key terms:

  • CMS will pay 69% of the net payable amount for most claims and 100% of the net payable amount for claims denied solely based on the patient not meeting the threshold of therapy time (the so-called Three-Hour Rule) or solely because the justification for group therapy was not documented in the medical record.
  • Eligible IRF denials must have been appealed on or before August 31, 2018 and, as of the settlement date, must still be pending at one of the four levels of administrative appeal.
  • An IRF must settle all of its eligible claims (no “cherry picking”).
  • CMS must pay within 180 days of a fully executed settlement agreement, and interest will accrue if CMS misses the 180-day deadline.
  • The settlement is completely voluntary—each IRF may elect to settle its appeals or it may instead seek decisions from ALJs or adjudicators at other levels of administrative appeal within the Department of Health and Human Services (HHS).

Additional details of the settlement and a copy of the settlement agreement are available on the CMS website at https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Appeals-Settlement-Initiatives/Inpatient-Rehabilitation-Facility-Appeals-Initiative.html.

“We are delighted that CMS finally announced this global settlement.  FAIR and our sister IRF organizations have worked relentlessly to negotiate this agreement with CMS, and IRFs will finally be paid for the outstanding care they provide to Medicare beneficiaries,” said Mary Beth Walsh, President of FAIR and former President and CEO of Burke Rehabilitation Hospital.  

“These very favorable settlement terms underscore what IRFs have known for years:  inpatient rehabilitation hospitals provide vital services to Medicare beneficiaries that are worthy of reimbursement, and recent reports of high IRF error rates are highly inaccurate,” said Felice Loverso, immediate past President of FAIR and CEO of Casa Colina Hospital and Centers for Healthcare.  “This settlement confirms that CMS’s contractors went too far in denying scores of legitimate Medicare claims for inpatient hospital rehabilitation.”

Background:  A person who is injured, becomes seriously ill, or requires surgery frequently requires post-acute hospital IRF care, where a rehabilitation physician coordinates the patient’s medical care during an intensive rehabilitation program.  IRFs improve the functional status and quality of life of patients recovering from surgical procedures, strokes, spinal cord injuries, brain injuries, amputations, hip fractures, and many other conditions. IRFs improve patients’ health, functional skills, and ability to live independently and perform common daily activities, such as walking, using a wheelchair, bathing, or eating.

For years, CMS auditors have targeted IRFs, denying thousands of claims after patients received medically necessary, beneficial care that enabled them to return home after debilitating events.  These auditors misapplied Medicare coverage rules, forcing IRFs to seek vindication in a hopelessly backlogged Medicare appeals system. IRFs usually prevail, and most appeals are eventually decided in favor of IRFs.  This appeals process, however, takes years because ALJs are extremely backlogged. In 2014, the backlog reached over 800,000 appeals, and appellants had to wait several years for ALJ decisions, despite Congress setting a 90-day deadline for ALJs to decide appeals.

To combat the backlog, the American Hospital Association (AHA) filed suit against HHS, seeking enforcement of the 90-day deadline for ALJ decisions.  Powers attorney Ron Connelly filed several “friend of the court” briefs on behalf of FAIR in support of AHA. The FAIR briefs highlighted the effect of the ALJ backlog on IRFs and their patients.  As a result of FAIR’s efforts, the D.C. Circuit Court of Appeals concluded that the backlog has a “real impact on health and human welfare.” Last year, a federal court in the District of Columbia held in favor of AHA and ordered HHS to clear the backlog by the end of 2022.